Will the "Tobacco Strategy" Work Against Big Oil?

ExxonMobil may face a reckoning under the Martin Act for its failure to disclose the environmental dangers of fossil fuels.

Photograph by Laurent GRANDGUILLOT / REA / Redux

According to InsideClimate News, the office of New York State Attorney General Eric Schneiderman had been investigating ExxonMobil for a year before it issued a recent subpoena for “documents on what Exxon knew about climate change and what it told shareholders and the public.” The subpoena compelled ExxonMobil to hand over scientific research and communications about climate change dating back to 1977. (Exxon and Mobil merged to become a single corporation in 1999.) The investigation is based on New York State’s consumer-protection and general-business laws and, crucially, the state’s Martin Act, InsideClimate News reported. That statute prohibits fraud or misrepresentation in the sale of securities and commodities, and gives the Attorney General extraordinary power to fight financial fraud.

Exxon had no duty to share with the public the information it gathered about climate change starting almost forty years ago, but it was forbidden to deceive shareholders and potential buyers of its shares. Earlier this fall, InsideClimate News and the Los Angeles Timesreported that Exxon scientists warned executives about the potential environmental catastrophe from the use of fossil fuels, and that, even so, the company deliberately spread doubt about that scientific view. In cases like this, the Martin Act is a particularly potent tool because the state must prove only misrepresentation, omission of a material fact, or other conduct that deceives or misleads the public. It doesn’t require the Attorney General’s office to show proof of intent to defraud or proof that anyone was defrauded.

Members of Congress, environmentalists, and academics have been calling for a state or federal investigation since before the story broke about the company’s far-reaching research. Back in May, Senator Sheldon Whitehouse, a Rhode Island Democrat, wrote, in the Washington Post, “Fossil fuel companies and their allies are funding a massive and sophisticated campaign to mislead the American people about the environmental harm caused by carbon pollution,” and said that these activities were a lot like “those of Big Tobacco denying the health dangers of smoking.” Now, Whitehouse and many others are calling for a Justice Department RICO probe of ExxonMobil, much like the RICO investigation of tobacco in the late nineties.

Is the “tobacco strategy” the way to try to document that ExxonMobil fraudulently deceived the public about climate change and hold the giant energy company accountable? It is a promising but hugely expensive and gruelling model. Even if such a measure succeeds against ExxonMobil and perhaps against other big oil companies, it is likely to be one victory in a very long war. Read two pieces of writing, one voluminous, the other breezy, and you can grasp what the litigation strategy against the tobacco companies was, how it succeeded, and why, despite its success, the war against Big Tobacco carries on, into its seventh decade—almost a century after scientists began to focus on the link between cigarette smoking and lung cancer, and a half-century after the Surgeon General issued the historic report “that cigarette smoking contributes substantially to mortality from certain specific diseases and to the overall death rate.”

The first piece of writing is the 1,652-page opinion of Gladys Kessler, the Washington, D.C., federal trial judge who, in August of 2006, found “overwhelming evidence” that nine big tobacco companies conspired to violate, and did violate, the federal Racketeer Influenced and Corrupt Organizations Act. For fifty years, the judge found, they deceived “the American public about the health effects of smoking and environmental tobacco smoke, the addictiveness of nicotine, the health benefits from low tar, ‘light’ cigarettes, and their manipulation of the design and composition of cigarettes in order to sustain nicotine addiction.”

The second work is “Thank You for Smoking,” Christopher Buckley’s satirical novel about a trio of Washington lobbyists for the liquor, firearms, and tobacco industries (the MOD Squad, as in Merchants of Death). The book is an inspired sendup of, among other things, Big Tobacco’s insistence that its self-defense is about protecting individuals’ freedom of choice (“the bedrock principles that our Founding Fathers laid down, many of whom, you’ll recall, were themselves tobacco farmers”). From today’s vantage point, the book is a reminder of how unyielding the tobacco industry has remained, even after court cases and many other efforts have educated the American public about tobacco’s lethal dangers.

Buckley’s book was published in 1994, which anti-tobacco activists identify as the beginning of the third wave of tobacco litigation. The first stretched from the nineteen-fifties to the nineteen-eighties and was, by all accounts, a failure. As the Tobacco Free Initiative of the World Health Organization recounted, in about a hundred and fifty cases the plaintiffs—usually individuals suffering from lung cancer, or their families—sued tobacco companies for money to cover medical expenses, lost wages, and pain and suffering. The companies settled a few cases, but most cases were dismissed or withdrawn, and tobacco won all that went to trial, denying a causal link between smoking and lung cancer and insisting that the medical evidence showing an apparent association between them was highly dubious.

In the second wave, from the nineteen-eighties to the early nineties, individuals and families brought almost two hundred cases against the tobacco companies based on new legal theories, like the companies’ failure to warn about the hazards of smoking. The companies and their lawyers smugly used scorched-earth tactics and maintained their almost perfect record. As a lawyer for one of the companies put it, “the way we won these cases was not by spending all of [R. J. Reynolds’s] money, but by making the other son of a bitch spend all of his.” The legal scholar Robert Rabin wrote in the Stanford Law Review that the tobacco companies’ skill at driving up their opponents’ costs and pushing them out of court with delaying tactics was “unique in the annals of tort litigation.” Judge Kessler later wrote about the “absolutely central role” that lawyers played in the “fraudulent schemes”: “What a sad and disquieting chapter in the history of an honorable and often courageous profession.”

In the third wave, states sued the tobacco companies and eventually won two hundred and forty-six billion dollars in settlements to cover the immense costs of treating people with illnesses from tobacco. More important, they forced the companies to disclose thirty-five million pages of tobacco-related documents, which showed that the industry used chemicals to make its products more addictive, marketed them deceptively, and concealed their terrible impact on health. That mountain of information and further mountains of data gathered by Congress and the Food and Drug Administration led the Justice Department to bring its lawsuit, which culminated in Judge Kessler’s epic account. She wrote:

The seven-year history of this extraordinarily complex case involved the exchange of millions of documents, the entry of more than 1,000 Orders, and a trial which lasted approximately nine months with 84 witnesses testifying in open court. Those statistics, and the mountains of paper and millions of dollars of billable lawyer hours they reflect, should not, however, obscure what this case is really about. It is about an industry, and in particular these Defendants, that survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national health care system. Defendants have known many of these facts for at least 50 years or more. Despite that knowledge, they have consistently, repeatedly, and with enormous skill and sophistication, denied these facts to the public, to the Government, and to the public health community.

To establish liability of the defendants under RICO, the government had to prove that the companies engaged in a pattern of racketeering acts in a scheme to defraud. Judge Kessler detailed a hundred and eight acts—for example, that some of the tobacco companies mailed press releases that included false statements about the addictiveness of smoking. She summarized, “The purpose of the scheme was to obtain, from smokers and potential smokers, money, i.e., the cost of cigarettes, to fill the coffers of the corporate Defendants.” Attorney General Schneiderman would have to prove less in a lawsuit under the Martin Act, but a Justice Department victory under RICO would probably have greater clout because of that law’s provisions for remedies preventing violations of the statute in the future.

There is now a fourth wave of tobacco lawsuits by individuals and their families, claiming that tobacco companies knowingly sold dangerous products and concealed smoking health risks, but the third wave seems to have no end, and the tobacco industry remains formidable. In May, in the latest ruling about the Big Tobacco case, the U.S. Court of Appeals for the District of Columbia Circuit held that the federal trial court can’t require the companies “to announce that they deliberately deceived the public,” because that exceeds its authority. Judge David Tatel described the appeal as “the fifth in this long-running RICO case against the nation’s cigarette manufacturers,” now sixteen years old.

Tobacco remains the No. 1 cause of deaths that could be prevented in the United States, which amounts to four hundred and eighty thousand dead a year, including fifty thousand from secondhand smoke. Though its effects are very costly to society and, to many, immoral, tobacco is mainly a scourge for smokers and those who live and work with them. Climate change is a threat to the entire planet and mankind as a whole, and is annually getting worse.

Lincoln Caplan, a former New Yorker staff writer, is a senior research scholar at Yale Law School and the author of “American Justice 2016: The Political Supreme Court.”

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